eGain(US:EGAN)2023-02-13 16:00PART I. FINANCIAL INFORMATION Financial Statements (Unaudited) The unaudited condensed consolidated financial statements detail financial positions for the periods ended December 31, 2022, and 2021 Key Financial Highlights (Six Months Ended Dec 31, 2022 vs 2021) | Metric | Six Months Ended Dec 31, 2022 | Six Months Ended Dec 31, 2021 | | :--- | :--- | :--- | | Total Revenue | $50.4 million | $44.5 million | | Gross Profit | $37.3 million | $33.1 million | | Income (Loss) from Operations | ($0.46 million) | $0.06 million | | Net Loss | ($0.12 million) | ($0.28 million) | | Net Cash from Operations | $8.2 million | $4.7 million | - As of December 31, 2022, the company held $80.9 million in cash and cash equivalents, an increase from $72.2 million at June 30, 202211 - On November 14, 2022, the Board of Directors authorized a stock repurchase program of up to $20 million, with no shares repurchased as of December 31, 2022115117 Condensed Consolidated Balance Sheets The balance sheet shows total assets of $122.7 million and total stockholders' equity of $61.4 million as of December 31, 2022 Condensed Consolidated Balance Sheet Data (in thousands) | Account | Dec 31, 2022 | June 30, 2022 | | :--- | :--- | :--- | | Total Current Assets | $101,511 | $104,135 | | Total Assets | $122,675 | $126,009 | | Total Current Liabilities | $55,501 | $62,022 | | Total Liabilities | $61,304 | $69,152 | | Total Stockholders' Equity | $61,371 | $56,857 | Condensed Consolidated Statements of Operations Revenue grew 13% to $50.4 million for the six-month period, significantly narrowing the net loss from the prior year Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 FY2023 (3 mo) | Q2 FY2022 (3 mo) | H1 FY2023 (6 mo) | H1 FY2022 (6 mo) | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $25,600 | $23,093 | $50,363 | $44,543 | | Gross Profit | $18,848 | $16,992 | $37,329 | $33,143 | | Income (Loss) from Operations | $213 | ($630) | ($457) | $60 | | Net Loss | ($104) | ($826) | ($120) | ($275) | | Basic & Diluted Loss per Share | ($0.00) | ($0.03) | ($0.00) | ($0.01) | Condensed Consolidated Statements of Cash Flows Net cash from operating activities increased to $8.2 million for the six-month period, driven by working capital changes Cash Flow Summary (Six Months Ended Dec 31, in thousands) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $8,175 | $4,681 | | Net cash used in investing activities | ($293) | ($276) | | Net cash provided by financing activities | $1,005 | $1,088 | | Net increase in cash | $8,694 | $5,250 | Notes to Condensed Consolidated Financial Statements Notes highlight the successful SaaS transition, with SaaS revenue growing 16% and significant remaining performance obligations Disaggregation of Revenue (Six Months Ended Dec 31, in thousands) | Revenue Type | 2022 | 2021 | | :--- | :--- | :--- | | SaaS revenue | $46,057 | $39,645 | | Legacy revenue | $480 | $1,806 | | Total subscription revenue | $46,537 | $41,451 | | Professional services revenue | $3,826 | $3,092 | | Total revenue | $50,363 | $44,543 | - As of December 31, 2022, remaining performance obligations were $92.1 million, of which $56.5 million is expected to be recognized as revenue within one year90 - For the three months ended December 31, 2022, two customers accounted for 19% and 10% of total revenue, respectively, with one being a partner59 Management's Discussion and Analysis of Financial Condition and Results of Operations Management's analysis highlights a successful SaaS transition, revenue growth, and a strong liquidity position despite increased operating expenses - The company has transitioned to a SaaS-only business model for new clients and is actively migrating legacy perpetual license clients to SaaS, expecting legacy revenue to continue its decline130 SaaS and Legacy Revenue Growth (Six Months Ended Dec 31) | Revenue Type | 2022 (in thousands) | 2021 (in thousands) | Change (%) | | :--- | :--- | :--- | :--- | | SaaS revenue | $46,057 | $39,645 | 16% | | Legacy revenue | $480 | $1,806 | (73)% | - As of December 31, 2022, remaining performance obligations were $92.1 million, with $56.5 million expected to be recognized as revenue within one year150 - The company believes its existing capital resources, including $80.9 million in cash and cash equivalents, are sufficient to maintain operations for at least the next 12 months202203 Results of Operations Revenue increased 13% driven by SaaS growth, though higher operating expenses led to a small operating loss for the six-month period Revenue by Geography (Six Months Ended Dec 31, in thousands) | Region | 2022 | 2021 | Change (%) | | :--- | :--- | :--- | :--- | | North America | $38,922 | $31,992 | 22% | | Europe, Middle East, & Africa | $11,441 | $12,551 | (9)% | - Cost of subscription revenue increased by 20% for the six months ended Dec 31, 2022, primarily due to a $1.4 million increase in cloud-computing costs174177 - For the six months ended Dec 31, 2022, R&D expenses increased 19% to $14.1 million and Sales & Marketing expenses increased 18% to $18.4 million compared to the prior year period185189 Liquidity and Capital Resources The company maintains strong liquidity with $80.9 million in cash and cash equivalents, with operating cash flow improving year-over-year - As of December 31, 2022, principal sources of liquidity were cash and cash equivalents of $80.9 million and accounts receivable of $16.5 million20211 - Net cash from operating activities increased to $8.2 million for the six months ended Dec 31, 2022, compared to $4.7 million in the prior year, driven by timing of payments for accounts payable and accrued liabilities204205 Quantitative and Qualitative Disclosures about Market Risk The company's primary market risks involve foreign currency exchange and interest rates, with no current use of hedging instruments - The company is exposed to foreign currency risk, with identifiable assets denominated in foreign currency totaling approximately $19.1 million as of December 31, 2022213 - A hypothetical 10% increase in the value of the U.S. dollar relative to other currencies would decrease the value of these foreign assets by $1.9 million213 - Interest rate risk is related to cash and cash equivalents, and management believes a 10% change in interest rates would not have a material impact on fair value or income215 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of December 31, 2022, with no material internal control changes - The CEO and CFO concluded that as of December 31, 2022, the company's disclosure controls and procedures were effective at the reasonable assurance level217 - There were no material changes to the company's internal control over financial reporting during the last fiscal quarter219 PART II. OTHER INFORMATION Legal Proceedings The company is not party to any material legal proceedings but is involved in routine matters in the ordinary course of business - The company is not currently a party to any material legal proceedings221 - In the ordinary course of business, the company is involved in various legal proceedings and claims, including those related to alleged infringement of third-party intellectual property rights221 Risk Factors Significant risks include intense competition, customer concentration, international operations, cybersecurity threats, and substantial CEO stock ownership - The company faces intense competition from larger software companies like Microsoft, Oracle, and Salesforce, and depends on a relatively small number of customers for a substantial portion of its revenue236237 - The company conducts a significant portion of its business internationally, with 23% of revenue from EMEA in Q2 FY23 and 43% of its workforce in India as of Dec 31, 2022, exposing it to geopolitical and currency risks247249 - Cybersecurity breaches and evolving data privacy regulations, such as GDPR and CCPA, pose significant risks of noncompliance, financial penalties, and reputational damage284293299 - As of December 31, 2022, the CEO, Ashutosh Roy, beneficially owned approximately 27% of the company's outstanding capital stock, giving him significant control over matters requiring stockholder approval323 Exhibits Filed exhibits include required CEO/CFO certifications under Sarbanes-Oxley and Interactive Data Files (XBRL) - The exhibits filed include Rule 13a-15(e)/15d-15(e) certifications from the CEO and CFO, Section 1350 certifications, and Inline XBRL data files325